Question: Take the linear model Y X11X22e with E[Xe] 0. Consider the restriction 1 2 2. (a) Find an explicit expression for the

Take the linear model Y Æ X1¯1ÅX2¯2Åe with E[Xe] Æ 0. Consider the restriction

¯1

¯2

Æ 2.

(a) Find an explicit expression for the CLS estimator e¯ Æ ( e¯1, e¯2) of ¯ Æ (¯1,¯2) under the restriction.

Your answer should be specific to the restriction. It should not be a generic formula for an abstract general restriction.

(b) Derive the asymptotic distribution of e¯1 under the assumption that the restriction is true.

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